Q&As
- A few fewer luxuries and many New Zealanders could afford to buy homes.
- 2 Q&As on whether the Reserve Bank got it right with the new coins.
- A financial planner objects to what I said last week about how to choose an adviser.
QThe sky is falling!
I’m sick and tired of hearing how ‘average’ New Zealanders can’t afford to buy a house. The newspapers are full of such stories, the news and so-called current affairs programmes have stories on it, and it’s time it became more balanced.
What annoys me now is that the majority of these average Kiwis have new cellphones, flash tv’s, ipods, sky tv, broadband, café coffee twice a day, designer clothes, they dine out multiple times a week, drink in expensive bars, buy their lunch every day and drive everywhere in cars they are paying off.
Forgoing some of these things makes a BIG difference to your savings.
I’m often amazed at my colleagues who “can’t afford” to buy a house, and yet have all the aforementioned “toys”. “Have everything, right now!” seems to be the way people live (and are marketed to) these days.
People need to decide if they want to stay on the never-ending quest to have the latest gadgets, styles and “things”. Or can they make some minor sacrifices and buy a house?
AThere are certainly some New Zealand families that don’t have “toys” and struggle to provide basic for their children.
But you clearly know people who don’t fall into that category. And I quite agree, there are lots of people who could buy a house if they spent less on unnecessary stuff.
It’s tempting for us old fogeys to say that we were happy with a lot fewer luxuries when we were saving for our first houses, or paying the mortgages on them.
Of course we were. And our parents were probably disparaging about our expectations of having luxuries like an automatic washing machine and a TV. And so it goes back, to the time when it was a luxury to have a copper to wash clothes rather than using a stream.
Each generation spends less time on drudgery and enjoys more choice in entertainment. And that’s great.
It does seem, though, that things have got out of whack lately.
I remember a satisfied feeling that came from giving up some luxuries to save for and pay off a home. Those who complain because they can’t have everything now might be surprised at how good it feels to set some priorities and work towards big goals.
QI think this whole discussion about inclusion or non-inclusion of some coin denomination which may result in increasing prices of products is meaningless.
Retailers can price the products at whatever value they like. It is the buyer who decides whether that price is reasonable and if so he/she wants to buy at that price or not.
Therefore if retailers want to make a sale they are forced to give an attractive price.
The fact that they will increase the price to the next 10 multiple instead of 5 is of no significance. They may go to a lower 10 multiple instead of higher 10 multiple in the absence of a 5c coin. I think the same argument can be used for not issuing 25c coins.
The less the number of coins the better it is.
AGood point. Consumers’ power to not buy will always constrain retailers’ power to raise prices.
QMathematics alert, regarding the choice between 10c, 20c and 50c coins versus 10c, 25c and 50c coins!
Clearly, replacing the 20c with a 25c coin allows purchases at 35c and 45c, which would not otherwise be possible. But consider a purchase for either of these amounts if the purchaser only has a 50c coin available. How would the retailer then give the required change of 5c or 15c?
Back to the drawing board.
The USA retains the old fashioned quarter, but frankly their system is anachronistic and unenviable. They even retained the 1c coin, which has no practical value except to decorate the bottom of every water feature worldwide.
AAnother good point. You readers are great thinkers.
Presumably your argument is behind the Reserve Bank’s preference for a “basic 10c system”.
QBeing a regular reader of your column and a practising certified financial planner I usually enjoy reading the letters and your responses.
However, your response last week to the two middle-aged women was certainly not one of your best.
Your suggestion for the women to look through the Yellow Pages is poorly judged. On what criteria? Does the size and colour of the advert indicate an adviser who gives better advice? In that case who says size doesn’t matter!
Or is it the name of the company (as some research suggests that names at the start of the alphabet have more luck in attracting business through these types of avenues)?
Your suggestion that they should not seek advice from their friends is intriguing, as I feel that this can be a good starting point if the friend’s adviser has established a track record of good service and trust, two areas which I believe are important when dealing with clients.
Finally, directing them to the Consumer and Sorted websites is fine, but may I suggest that they also look at the Institute of Financial Advisers (IFA) website.
This has information on what they should do when dealing with advisers as well as details of those that belong to the Institute, and as you know dealing with someone who belongs to a professional body is better than not.
Finally, not all financial advisers are just looking for client’s money to “play with” and many certainly have client’s “best interests” at heart.
ALet me quote what I said in last week’s column:
“Here’s how I suggest you go about (finding a financial adviser): Ask friends and relatives for recommendations. If you don’t come up with any, look through “Financial planners” in the Yellow Pages for ads that appeal to you.
“But don’t just go with someone because a friend recommends them. Friends aren’t always astute judges.”
My first suggestion was to ask friends — although with caution. All too often people are happy with their financial adviser for a while — until the markets dip and they hadn’t realised what would happen then, or they find out the adviser is receiving commissions or other rewards that might well have biased their investment choices, and so on.
Still, your point is fair. If a friend has a good track record with an adviser over quite a few years, that can indeed be a good starting point.
The Yellow Pages? Perhaps I should have been more explicit. I meant ads that appeal in what they say, not in how big they are. It’s also a quick way of finding who is in your area.
But it’s certainly not enough. The column went on to say that you should do a lot more research before choosing an adviser.
As for websites, I have nothing against the insitute’s website, www.fpia.org.nz, but it doesn’t have anything like the info for consumers that www.consumer.org.nz or www.sorted.org.nz has.
It does include a list of members in each region. And as you say it’s often better to deal with a member of a trade association, partly because you have somewhere to go to make complaints if things go wrong.
And so to the key point: whose best interests do financial advisers serve — their own or their clients?
In some set-ups — for example when the adviser is paid by fees only — the two can be aligned. In others — for example when the adviser gets more commission from some investments than others — they are not aligned.
I don’t want to reopen the debate on how advisers are paid. We thrashed that issue in this column a while back. Suffice to say that clients must be aware of all their adviser’s remuneration — as well as whether the adviser knows what they are doing.
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Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.